04 Week

This week we discuss new business models that have been enabled by Web 2.0. We start with the "Dollar Shave Club." I am can personally attest to being sick of paying high prices for razor blades and switching to a more cost effective (older) way of shaving using a double edge razor. The genius of the dollar shave club lies in using Web 2.0 for marketing and gathering a customer following of the concept. Subscription also is enable through the website, however the logistics and delivery of the weekly shaving kit relies on old fashioned logistics to deliver the product to the customer's home. Recently, I noticed an advertisement from a company called The Trunk Club, with a very similar business model. The advertisement I saw was on Facebook as part of my News Feed. The company serves a slightly affluent male clientele who does not have a good dress sense. The business requires it's clients to sign up online at which time the person is assigned a personal stylist. The personal stylist calls the client and discusses the person's tastes. He/she then puts together a "Trunk" of designer clothes that are well coordinated and ships it to the client. The client is free to try all the clothes at home and keep what he like before sending back the remaining Trunk to the company. The client is charged only for the clothes he keeps and shipping is free both ways. The Dollar Shave Club and The Trunk Club are very similar in that they provide a level of convenience to the customer. They both target men. The difference between the two is that The Dollar Shave Club aims to provide a cheaper shave while the The Trunk Club aims to provide designer clothing for a clientele who is not very cost concious.

The second business model we reviewed this week was novel way an eye wear company, Warby Parker sold both prescription eyewear and sunglasses for a lower price than traditional brick and mortar eye wear stores. The company had to over come the key obstacle where customers generally cannot tell simply by looking at the eye wear how they would look in it when they actually wore it. The company used its website to present hundreds of styles online and allowed the customer to pick 5 styles to try out. The customer could try out the 5 styles of glasses they picked in the comfort of their home and pick the one they like, Warby Parker would then order the prescription lenses made for the style of eye wear the customer picked. Interestingly Warby found it necessary to have a store front in a few markets to allow customers to visit and try out the styles. It was more of a marketing move rather than a revenue enhancing channel. Warby Parker's key to success is that they are able to sell chic eye wear for lower prices than your neighborhood eye wear store.

The third business model we reviewed this week was Hointer. The store was started by an Amazon.com executive and the logistic design of the stock room may have been leveraged from how amazon manages its stocks. The store incorporates smartphones into the shopping experience by requiring customer to download an app. The app allows the customer to simply scan the designs of jeans they like and order the size. When the customer is ready is try out the clothing the app initiates a backend robotic stock picker to have the clothes ready for the customer in the trial room. The beauty of this automation, is that it reduces the number of sales people on the shop floor. It also provides the customer convenience by having the customer pick the size on the app instead of wading through piles of clothes to find the right size.

The 3 business models discussed above have all been enabled by the Web 2.0 technologies. Automation and the ever present access to computing power and the internet will no doubt foster more novel business models. These models are designed to bring choices to the customer at low cost and  with high degree of convenience.